Celsius Network, a crypto lending company that is currently bankrupt, has received approval from the US Bankruptcy Court for the Southern District of New York to convert its alternative cryptocurrencies (altcoins) into Bitcoin (BTC) or Ethereum (ETH). This decision will enable the company to distribute funds to its creditors in the two most widely used cryptocurrencies.
The court order, issued on June 30 by Judge Martin Glenn, grants Celsius the ability to sell all of its altcoins starting from July 1, 2023. By converting these altcoins into bitcoin or ether, Celsius aims to maximize the value of its assets, as BTC and ETH are highly liquid and widely accepted cryptocurrencies. This strategy will help Celsius generate more liquidity and improve its chances of repaying the numerous victims of its financial situation.
The court order also permits Celsius to make commercially reasonable efforts to maximize the value of altcoins that it cannot sell immediately. This means that Celsius may choose to retain some of its altcoins, hoping that their prices will recover over time.
This approval to convert altcoins or sell cryptocurrency assets (excluding tokens linked to Withhold or Custody accounts) represents a positive development for Celsius as it strives to restructure its business and emerge from bankruptcy.
The troubles faced by Celsius began when the Terra ecosystem, along with its associated tokens (Terra and TerraUSD), experienced a collapse, leading to financial difficulties for Celsius and leaving its creditors in a state of anxiety.
In July 2022, Celsius Network filed for Chapter 11 bankruptcy protection after temporarily suspending withdrawals in June 2022, citing extreme market conditions. The company’s bankruptcy filings indicated that retail customers would be most impacted by its financial downfall.
Despite the bankruptcy filing, the recent court decision offers new possibilities and a glimmer of hope for Celsius Network’s users.
In May, Celsius found a new owner when it was acquired by a crypto consortium called Fahrenheit. Under the guidance and ownership of this consortium, Celsius is now working to create a revised bankruptcy plan. While the specifics of this plan have not been disclosed yet, it is evident that the assets will be distributed exclusively in BTC and ETH.
Following Celsius Network’s bankruptcy, other companies such as Voyager Digital, Vauld, FTX, and many more have also faced financial difficulties, prompting them to explore innovative strategies to meet creditor demands or cease operations entirely.